Qantas Faces Low-fare Quandary

Qantas plans to retire four Boeing 747s as part of its international network restructuring. (Photo: Qantas)

While Qantas participates in a series of negotiating sessions with three of its employee unions, it appears the threat of low-fare competition in the region won’t soon abate, raising tensions between the Australian flag carrier’s management and workers who fear losing their jobs to overseas “outsourcing.”

The airline drew the ire of its employee groups when it announced in August plans to open a new airline based in Asia “with a new name, new aircraft and a new look and feel,” along with a new low-fare venture with Japan Airlines and Mitsubishi called Jetstar Japan. Meanwhile, plans call for Qantas itself to shed 1,000 jobs as a result of a new international network strategy and retirement of aging aircraft. A series of “rolling strikes” ensued, prompting Qantas to shut down all operations for two days.

Last week Fair Work Australia—the country’s workplace relations tribunal—granted the Australian Government’s application to end all industrial action by the Australian Licenced Engineers Union, the Transport Workers Union, the Australian and International Pilots Union and Qantas, effectively ending the airline’s voluntary grounding. The tribunal’s orders called for 21 days of negotiations between the parties, during which no further industrial action can take place. If they do not reach an agreement during the three-week period, the case will go to binding arbitration.

George Hamlin of Hamlin Transportation Consultants would advise both sides to avoid that scenario, however. “Arbitration is always a crap shoot,” he said. “If both bargaining parties want to do a deal, it’s in their interest to do it before arbitration, because in arbitration strange things have been known to happen.”

Still, the underlying problem of low-fare competition in the Asia-Pacific region continues to plague Qantas, whose proposed solution stands at the center of the controversy with its unions. For example, a new potential low-fare competitor owned by Singapore Airlines by the name of Scoot stands ready to launch operations starting in mid-2012 with a fleet of four Boeing 777-200s purchased from its parent company.

Domestically, and in the more immediate future, further low-fare competition comes in the form of the re-launch of Brisbane-based Strategic Airlines as Air Australia starting November 15. Air Australia plans to start with three Airbus A330 flights per week from Melbourne and Brisbane to Honolulu. The airline also intends to start flying four times a day between Brisbane and Melbourne next month.